FGV Audited Financial Statements 2019

120 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 23 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (ii) Palm upstream operations in Malaysia (excluding APL) (continued) The Group’s review includes an impact assessment of changes in key assumptions. Based on the sensitivity analysis performed, the Directors concluded that no reasonable change in any of the base case assumptions would cause the carrying amount of the CGU to exceed the recoverable amount. a) CPO and PK price CPO and PK is determined based on the forecast provided by the Group’s trading arm subsidiary, based on historical results and industry trend. b) Average FFB yield and estate costs The average FFB yield and estate costs are based on forecast provided by the Group’s upstream operations management, based on this Group’s approved budget, historical results and industry trend. c) Discount rate The post-tax discount rate used reflects specific industry risks relating to the palm plantation operations including consideration of comparison with comparable peer companies in Malaysia. (iii) Asian Plantation Limited (“APL”) In previous financial year, the goodwill from the acquisition of APL was assessed separately because management had re-organised its reporting structure to review APL operations separately from the other palm upstream operations. The re-organisation was done as APL continues to be loss making since acquisition, despite efforts undertaken to improve its performance due to several challenges faced by APL in particular due to its geographical location, labour shortages and weather. In addition, certain planted areas have been identified as no longer harvestable resulting in significant reduction in overall hectarage of planted areas. Based on the assessment, the goodwill of RM512,946,000 had been fully impaired in the previous financial year. Refer to Note 20(b) for the key assumptions used in the valuation of APL. (b) Impairment test for intangible assets (other than goodwill) Suspended construction of a plant in FGV Green Energy Sdn. Bhd. (“FGVGE”), an indirect subsidiary of the Company was identified as indicator for an impairment test to be performed for FGVGE’s non-current assets. The recoverable amount of the plant was determined based on the offer received from a potential buyer. As at 31 December 2018, the offer had been withdrawn and as a result, the Group had recognised impairment loss of RM10,864,000, which was recorded as impairment of non-financial assets of the Group in the previous financial year.